Another week reveals another chapter of the Garuda Indonesia saga. Indonesia’s Deputy State-Owned Enterprises Minister told parliament last week the airline was technically bankrupt as debt keeps rising by US$100 – $150 million per month, and questions get asked about over-the-top lease payments.
Garuda creditors asked to wipe debt or take zero-coupon bonds
Last week, the Minister, Kartika Wirkoatmodjo, told a House of Representatives public hearing about the airline’s latest scheme to cut its $9.75 billion debt. That scheme includes asking creditors to wipe debt or swap debt for equity.
The Indonesian Government has a 60.54% stake in the beleaguered flag carrier. Of its total debt, Garuda Indonesia owes US$6.3 billion to 30 aircraft lessors, all of whom must be negotiated with individually.
“If there is no debt reduction on its balance sheet, Garuda will not be able to survive.” Mr Wirkoatmodjo told the hearing. The current plan is to reduce the fleet from 202 aircraft to 134. In addition to offering aircraft lessors zero-coupon bonds or a debt for equity swap, Mr Wirkoatmodjo wants to transfer leases from a fixed monthly rate to power by the hour leasing.
In addition to lessors, Garuda Indonesia owes monies to airports, oil companies, air navigation providers, ground handling companies, and banks. Mr Wirkoatmodjo also wants to offer them zero-coupon bonds.
Garuda Indonesia faces some radical surgery. Kartika Wirkoatmodjo said almost 100 routes face the chop. The airline would become a domestic airline primarily and, even then, would focus on profitable routes only.
Garuda’s aircraft lease costs four times the industry norm
Kartika Wirkoatmodjo like the Citilink model. CitiLink is Garuda’s low-cost subsidiary. But the Indonesian Government has cooled on preparing state-owned Pelita Air Services to step…